Out Of State Employees Eligible To Recover Under CA Overtime Laws If They Perform Work In CA

In an important employment case for any California employer with out of state employees, the California Supreme Court in Sullivan v. Oracle, decided on June 30, 2011, ruled that out of state workers are covered by California's generous overtime laws when they come to this state on business even if that stay is temporary. The Court held that California's overtime laws apply to everyone who works in the state regardless of where they live. The ruling arose from litigation against Oracle over its failure to pay overtime to "instructors" who traveled to California to work from Colorado and Arizona. Their job was to train Oracle's customers in the use of the company's products. Oracle did not pay these instructors overtime as Oracle determined that they were exempt, as teachers, from California and federal overtime laws.

The instructors sued the company in a federal class action alleging misclassification and seeking unpaid overtime. The claims were largely settled except for the claims concerning non-resident instructors. The Ninth Circuit Court of Appeals found that the workers were covered by California overtime laws, but asked the California State Supreme Court for clarification regarding non-residents. The California Supreme Court expressly rejected the argument of Oracle that overtime laws in an employee's state of residence should apply. This ruling has potentially dramatic implications to California employers as it could open the proverbial Pandora's Box for employers, large or small, with employees out of state. For example, employees who are involved in sales, marketing, or provide administrative support, and are required by the employer to perform work in California, may now have the ability to seek overtime compensation in accordance with California law. The immediate impact of this decision is for employers to maintain complete records of all time spent by all employees working overtime including those from out of state and, on a conservative basis, pay their employees the appropriate California overtime compensation. A failure to do so may lead to direct action by the employees or, potentially, the employees banding together in a class action lawsuit against the California employer.